Not only does the EPA not follow the law in managing the ethanol quotas as outlined in Section 202 of EISA 2007 it appears to be completely ignoring SEC. 203. STUDY OF IMPACT OF RENEWABLE FUEL STANDARD and SEC. 204. ENVIRONMENTAL AND RESOURCE CONSERVATION IMPACTS

According to Section 203 the EPA is supposed: ” to assess the impact of the requirements described in section 211(o) of the Clean Air Act on each industry relating to the production of feed grains, livestock, food, forest products, and energy.

According to Section 204 the EPA is supposed to study: “Environmental issues, including air quality, effects on hypoxia, pesticides, sediment, nutrient and pathogen levels in waters, acreage and function of waters, and soil environmental quality.” It’s supposed to also study: “Resource conservation issues, including soil conservation, water availability, and ecosystem health and biodiversity, including impacts on forests, grasslands, and wetlands.”

These studies are supposed to insure that: “… in the case of any such renewable fuel produced from new facilities that commence construction after the date of enactment of this sentence, achieves at least a 20 percent reduction in lifecycle greenhouse gas emissions compared to baseline lifecycle greenhouse gas emissions.”

Well, what do you know? According to this study, things aren’t going so well:

If anyone believes that corn ethanol is achieving: “… at least a 20 percent reduction in lifecycle greenhouse gas emissions compared to baseline lifecycle greenhouse gas emissions.” is smoking some pretty good shit and I want them to share.

As 2014 comes to a close, it is interesting to note that the ethanol mandate in EISA 2007 is all but dead, though nobody seems to have a silver bullet to put it out of its misery or the nation’s misery. No one is willing to drive a stake through its heart, so we will pretend that it’s still a viable program.

Funny thing happened on the way to the funeral. Not only did the EPA fail to fulfill its legal responsibility for issuing the 2014 quotas, it has now said it won’t set quotas for 2015 until some indeterminate time in 2015 (if ever), according to this article in Bloomberg Businessweek. Seems the EPA has decided the 2014 quotas will be whatever the gasoline producers used; somewhere around 13.3 billion gallons of ethanol, not the 14.4 billion gallons proscribed in the table in Section 202 of EISA 2007.

Of course, once that table became meaningless when the EPA couldn’t enforce the advanced biofuel quotas back in 2011, I guess it naturally became easy to ignore it completely in 2014 and now 2015.

It’s time to cease the charade that anything in the RFS in EISA 2007 is legally meaningful. The quota table gets more absurd every year. In 2015 the table requires 3 billion gallons of cellulosic biofuel, yet the industry can’t make even 100 million gallons after 30 years of trying to find a commercially feasible process. The funniest thing is that 2015 marks the cap of corn based ethanol, the amount of which cannot be blended into our gasoline production because nobody wants to buy E85, which was the whole intent of the law. But nobody wants to talk about that problem. After 2015 all of the increases in the quota table are supposed to be satisfied with cellulosic ethanol, which can’t be made.

Oh, and on more slight little snag, that nobody is willing to talk about. Pretty soon, ethanol will cost more to blend into gasoline than the gasoline itself. This has happened twice since 2007 when the RFS was passed. So now, instead of reducing the price of gasoline, which the ethanol industry promised when oil was $100 / barrel, it will raise the price of gasoline while reducing mileage.

I’ve been waiting for the “I told you so” moment, so I could stop writing about this lunacy.

An article in the Well Servicing Magazine a couple of months ago, probably one among many because I haven’t done much research on this topic lately, sums it up pretty well. (Pun intended) The Renewable Fuel Standard (RFS) in EISA 2007 is imploding. After a search of the Internet I can’t even find where the EPA finalized this years ethanol blending quota, which was supposed to be set by the end of December last year. They don’t even follow their own rules. Here is the EPA proposed 2014 RFS and it is indeed the 2012 quota, but I can’t locate the finalized version.

As any fool could have seen, the constantly increasing quota to blend ethanol in gasoline was unsustainable. And finally this year, the EPA, which has sole authority to set the blending quota, blinked. Instead of increasing the quota as proscribed in the blending table embedded in the act, they decreased mandatory blending levels.

WE HIT THE BLENDING WALL

I doubt there is anywhere to go from here. Without producing copious amounts of E85, which isn’t going to happen, there is no way to fulfill the ethanol blending quota table in the RFS. E15 was dead on arrival when the EPA made it voluntary. The auto producers have wisely refused to warranty their products for anything above E10 in a non flex-fuel vehicle car. Producers and gas station chains will not sell it because they can’t afford the liability. Congress isn’t about to give them a liability waiver. If anything, Congress is trying to repeal the RFS.

On top of everything else, corn ethanol production would be capped next year anyway, so there is no use building more plants. There will be no increase in production, unless they can export it. Cellulosic ethanol was supposed to carry all of the increased ethanol production burden demanded by the quota table, but there are no commercially viable cellulosic ethanol plants, and without a market, which would have been available if E85 took off, there is no incentive to even try to perfect a process, unless it can be produced at a lot less cost than corn ethanol, which appears unlikely after three decades of trying.

I just hope the grownups in the EPA and the Congress will end this charade. Hmmm, “grownups” used in the same sentence as EPA and Congress? Disregard that, because it’s an oxymoron.

While some may celebrate the repeal of the state mandatory E10 law in Florida, I see nothing to celebrate because absolutely nothing will change in Florida. The Florida law was actually passed and invoked long after it was obvious that the federal RFS mandate in EISA 2007 was going to swamp every state with E10, which is happening. The repeal was a grandstand symbolic gesture to give drivers a choice. The Florida politicians are patting themselves on the back for winning the battle but they lost the war before the state mandatory E10 law took effect in 2010, two year after EISA 2007 went into effect.

While the legislators may believe that the residents of Florida will now see more E0 at their corner gas stations, absolutely nothing will change. One only has to look at the blending quota table in EISA 2007 and the gasoline terminal stock reports to know that there is no E0 generally available for autos. While there is some premium ethanol free gasoline at most of the terminals in Florida, it is obviously for marine and off road use. The primary supplier is Marathon Oil with their 90 AKI “Sport Fuel” which is intended for the marine, off road and small engine user. The 90 AKI fuel is not legal to sell as premium unleaded fuel at gas stations, although it could be sold as mid-grade, but most modern fuel stations have 3 button pumps with tanks for regular and premium and mix the two to provide mid-grade, so most stations don’t have a separate tank for mid-grade. It isn’t likely that Marathon means for this fuel to be sold for normal auto use and in fact when looking at the availability of E0 in Florida at Pure-Gas.org, most of this fuel is being sold at marinas. It would only make sense for Marathon to sell this gasoline to known non road uses so that it wouldn’t have to account for any of it in their fuel quota for ethanol blending. Otherwise, as we hit the blending wall this year, it would be costly to sell gasoline without ethanol and the price of this fuel would rise dramatically.

The other reason that I know that this was only symbolic is because the ethanol lobby didn’t crush this repeal. There were only five states with mandatory state E10 laws and none of them has any purpose now that all of our gasoline will be E10 anyway. Actually repealing the mandatory state ethanol laws might be a blessing in disguise for the ethanol lobby because most state mandatory E10 laws limit the ethanol blending level to E10 for non flex-fuel vehicles, thus prohibiting the sale of E15 in those states.

Finally, the ethanol lobby has a much bigger problem to worry about. We will hit … no, we will crash into the blending wall this year and after this year there will be a requirement to blend ever increasing billions of gallons of ethanol into auto fuel, with nowhere to put that ethanol except in storage tanks because Renewable Fuel as described in EISA 2007 is E85 for which there is no demand. Strange thing is, E10 is not Renewable Fuel as defined in the act, in fact it is never mentioned in the act. So how is it we are going to meet the Renewable Fuel Standard in EISA 2007? EPA? Any congress critter that voted for EISA 2007? Anyone care to explain how this is going to work?

One slight problem in the article, the authors completely misunderstand the cause. Here is their excuse:

“When the volumetric blending levels were set for the RFS in 2007, lawmakers, as well as industry representatives, didn’t expect the level of ethanol produced to exceed 10% of the national gasoline supply until much later this decade. But steadily declining gasoline demand coupled with increased fuel efficiency mean that benchmark, called the “blend wall,” will hit this year and, for some refiners, may have already been reached.”

Are you kidding me? Clearly the four people attributed at the end of this article never read the RFS mandate in EISA 2007, or having read it, did not understand it. My guess it is the former.

Nowhere in the act is there any discussion of a 10% level of ethanol blending. E10 is NOT mentioned in the act and the act is not a mandatory E10 law. Gasoline with 10% ethanol is NOT a Renewable Fuel as defined in the act. The entire act is obviously targeted towards increasing the production and distribution of E85 and the increased production of flex-fuel vehicles. All of the corporate welfare granted by the act is for these three objectives. The only Renewable Fuel defined in the act is E85 in several places, and in one place it is defined as any blend of E11 and above. Since the blending quota table in the act continues to require ever increasing amounts of ethanol be blended out through 2022, the only possible way of ever meeting the blending quotas was to produce copious amounts of E85.

It is going to be absolutely hilarious in the next couple of years when the blending quotas, which are cast in stone in the law, completely swamp the gasoline pool, with no place to put billions of gallons of excess ethanol and there will finally be no way to strip RINS because every producer will have to purchase a quota of ethanol that will exceed 100% of the amount that they can put in their gasoline production. All I can imagine is a tank farm boom to store the excess ethanol at our terminals and a steady increase in gasoline price to cover the ethanol that the producers will be forced to buy with nowhere to use it. I guess they are hopeful they can sell it in the international market.

Of course the supreme irony is that the ethanol production increases demanded for every year from 2015 to 2022 must be met essentially by cellulosic ethanol production which nobody can make in economically viable commercial amounts. So it isn’t just a blending wall we are finally crashing into, it is also a production wall.

I wonder when the EPA, the politicians, the media and the American people are going to finally figure what a ridiculous, unworkable sham the RFS mandate in EISA 2007 really is. I may be a fool, but I figured it out as soon as I actually read the act back in 2009. If you would like to read the act, you can find it here.

The EPA is supposed to publish the proposed annual RFS quotas in November of each year, then there is a mandatory 45 day comment period and then the proposal is enacted. I might add that it is enacted as proposed no matter what the comments are, as the request for waiver of the RFS by five states proved last year during the drought. If the EPA followed their own rules that would mean that everyone would know the annual quotas on the first day of the year.

Here is the pertinent information as it applies to blending levels of ethanol into our total gasoline supply:

Advanced biofuel 1.60%Renewable fuel 9.63%

If you add those two blending levels you will note that the total blending percentage is 11.23%, which means that every drop of gasoline sold in the U.S. will have to be E10 and there will be ethanol left over since the amount of E85 and E15 is totally insignificant and neither of them is growing. The only reason we didn’t hit the blending wall hard last year was that there is a loophole in the law that allows gasoline producers to carry forward 20% of their RINS into the following year.

I wonder if one reason that the NPRM is three months late is because it is becoming glaringly obvious that the blending quotas are unsustainable and it will become embarrassingly obvious that the RFS is going to implode soon, as anyone with an ounce of math skills can figure out … DUH!

On Friday, November 16, 2012, the EPA denied the waiver petition made by several states to drop mandatory ethanol blending as required by EISA 2007 for one year. You can find the denial as quoted here, “Based on the entire record before it, EPA has determined that each of the petitions and requests should be denied.” in the EPA document.

This is what the waiver denial portends. Even with the carry forward RINS, which are delaying the blending wall by maybe 20 billion gallons of E10 / year, by 2014, at the latest, the ethanol quota, cast in stone table, in EISA 2007 will swamp the gasoline pool and there will be nowhere to put the ever increasing ethanol quotas after that and the ludicrous E15 waiver will not delay this fact.

It was clear that the quota table in EISA 2007 was designed to produce Renewable Fuel, which is only defined as E85 in the act. OK, in one place in the act it is defined as E11 – E85, but it is NEVER defined as E10. However, we produce a minuscule amount of E85 and that will not increase enough in the next few years to avoid the blending wall because of the massive infrastructure that would be demanded to distribute and sell it. The fact that all of the gasoline in the U.S. is becoming E10 is an unintended consequence of EISA 2007 since E10 is NOT Renewable Fuel as defined by the act.

So here is a suggestion for the states that were denied the waiver. Any state can prohibit the blending of ethanol in all of the gasoline in their state, except for those few mandatory oxygenate areas that are still left, which are a few big urban areas and most of Southern California. There is no mandatory federal E10 law. EISA 2007 certainly isn’t a mandatory E10 law, it is a Renewable Fuel law, and E10 is NOT Renewable Fuel as defined in the act. So if a state can pass a mandatory E10 law, like my home state of Oregon did, useless as it is now, any state can clearly pass a law prohibiting E10 being sold in the state. This would certainly accelerate hitting the blending wall thus exposing what a farce and sham the federal Renewable Fuel Standard really is.

Of course until such time as the congress critters repeal the federal RFS in EISA 2007, which they might do if they finally wake up and understand that it can’t possibly fulfill its intended purpose, the gasoline producers will have to deal with ever increasing quotas of ethanol with nowhere to blend it. If the EPA is as obstinate as it is now with the cellulosic ethanol quotas that the gasoline producers must pay waiver penalties for a product they can’t buy, then the gasoline producers will have to do something with the ethanol they can’t blend. I have a suggestion. Start constructing large tank farms in Illinois, as near to ADM headquarters as possible, and the Iowa home of Senator Chuck Grassley, the champion of the RFS and the water boy for ADM. Just store the billions of gallons of ethanol in their back yards, by 2022 you are going to have to be able to store about 15 billion gallons of the stuff every year that you can’t use. You can just pass along the costs to us consumers just as you do with the millions of dollars in penalties for the cellulosic ethanol waiver credits. I’m sure we won’t mind, because we certainly don’t mind that you must pay for a product you can’t even buy, and you are passing along the costs to us right now.

Oh, and by the way, the whole EPA waiver review was a complete farce. Look on page 79 of the Notice, “The commenter failed to acknowledge that EPA is not required to issue a waiver when severe economic harm to a state, region or the United States is demonstrated. The statute provides that EPA “may” do so in that situation.” Bazinga! There was never the remotest chance in Hell that the EPA was going to grant the waiver. I hope the states wake up and take matters into their own hands. They have every opportunity to as outlined above, just ban E10 in your state.